The new leftist website, Vox, has an article by Sarah Kliff on Vermont’s experiment with a single-payer healthcare system.
But I don’t really have much to say about what’s happening in the Green Mountain State, other than to declare that I much prefer healthcare experiments to occur at the state level. Indeed, we should reform Medicaid and Medicare and also fix the tax code so that Washington has no role in healthcare. Then the states can experiment and compete to see what works best.
But that’s a topic for another day. The real reason I cite Kliff’s article is that Ezra Klein tweeted this image from the article and stated that is was “The case for single payer, in one graphic.”
I don’t know if the numbers in the graphic are correct, but I have no reason to think they’re wrong.
Regardless, I certainly don’t disagree with the notion that our healthcare system is absurdly expensive and ridiculously inefficient.
In other words, the folks at Vox have accurately diagnosed a problem.
However, do these flaws prove “the case for single payer”?
It’s probably true that “single payer” has a lower monetary cost than the system we have today (assuming you don’t include the cost of substandard care and denied treatment), but that doesn’t mean it’s the ideal system.
Indeed, there is a better way to deal with the waste, inefficiency, and bureaucracy of the current system. The answer is free markets and genuine insurance, both of which would help address the real problem of third-party payer.
Third-party payer, for those who are new to the healthcare field, is what you get when somebody other than the consumer picks up the tab. And because of government intervention, that’s what happens with about 90 percent of healthcare spending in the United States. Here’s what John Goodman had to say about this problem.
Almost everyone believes there is an enormous amount of waste and inefficiency in health care. But why is that? In a normal market, wherever there is waste, entrepreneurs are likely to be in hot pursuit — figuring out ways to profit from its elimination by cost-reducing, quality-enhancing innovations. Why isn’t this happening in health care? As it turns out, there is a lot of innovation here. But all too often, it’s the wrong kind. There has been an enormous amount of innovation in the medical marketplace regarding the organization and financing of care. And wherever health insurers are paying the bills (almost 90 percent of the market) it has been of two forms: (1) helping the supply side of the market maximize against third-party reimbursement formulas, or (2) helping the third-party payers minimize what they pay out. Of course, these developments have only a tangential relationship to the quality of care patients receive or its efficient delivery.
And here’s some analysis from a study published by the National Bureau of Economic Research.
In most industries, higher quality is associated with higher prices. That is not true in medical care, however, largely because of the public sector. …Every analysis of medical care that has been done highlights the significant waste of resources in providing care. Consider a few examples: one study found that physicians spent on average of 142 hours annually interacting with health plans, at an estimated cost to practices of $68,274 per physician (Casalino et al., 2009). Another study found that 35 percent of nurses’ time in medical/surgical units of hospitals was spent on documentation (Hendrich et al., 2008); patient care was far smaller. …In retail trade, the customer is the individual shopper. If Wal-Mart finds a way to save money, it can pass that along to consumers directly. In health care, in contrast, the situation is more complex, since patients do not pay much of the bill out-of-pocket. Rather, costs are passed from providers to insurers to employers… About one-third of medical spending is not associated with improved outcomes, significantly cutting the efficiency of the medical system and leading to enormous adverse effects.
Here’s my humble contribution to the discussion, starting with an explanation of how special tax breaks deserves some of the blame.
…how many people realize that this bureaucratic process is the result of government interference? For all intents and purposes, social engineering in the tax code created this mess. Specifically, most of us get some of our compensation in the form of health insurance policies from our employers. And because that type of income is exempt from taxation, this encourages so-called Cadillac health plans. …We have replaced (or at least agumented) insurance with pre-paid health care.
I then explain why this isn’t a good idea.
Insurance is supposed to be for unforseen major expenses, such as a heart attack. But our gold-plated health plans now mean we use insurance for routine medical costs. This means, of course, we have the paperwork issues…, but that’s just a small part of the problem. Even more problematic, our pre-paid health care system is somewhat akin to going to an all-you-can-eat restaurant. We have an incentive to over-consume since we’ve already paid. Except this analogy is insufficient. When we go to all-you-can-eat restaurants, at least we know we’re paying a certain amount of money for an unlimited amount of food. Many Americans, by contrast, have no idea how much of their compensation is being diverted to purchase health plans. Last but not least, we need to consider how this messed-up approach causes inefficiency and higher costs. We consumers don’t feel any need to be careful shoppers since we perceive that our health care is being paid by someone else. Should we be surprised, then, that normal market forces don’t seem to be working?
And I ask readers to think about the damage this approach would cause if applied in other sectors of the economy.
Imagine if auto insurance worked this way? Or homeowner’s insurance? Would it make sense to file insurance forms to get an oil change? Or to buy a new couch? That sounds crazy. The system would be needlessly bureaucratic, and costs would rise because we would act like we were spending other people’s money. But that’s what would probably happen if government intervened in the same way it does in the health-care sector.
This is probably more than most people care to read, but it underscores the point that we don’t have a free market in health care. Not now, and not before Obamacare.
So the folks at Vox are right about the current system being a mess. But I disagree with the notion that more government is a way to solve problems created by government.
The real answer, as I’ve already noted, is to get Washington out of health care. This means entitlement reform AND tax reform.
And if you want to get a flavor of why this would generate better results, watch this Reason TV video and read these stories from Maine and North Carolina.
So how do we get there? Repealing Obamacare is a necessary but far from sufficient condition. Cato’s Adjunct Scholar, John Cochrane, has a nice roadmap of what’s really needed.
Though Vermont certainly is welcome to travel in the other direction. It’s always good to have bad examples and I wouldn’t be surprised if the “Moocher State” played that role.
Reblogged this on Utopia, you are standing in it!.
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[…] someone other than the consumer, this is a major problem. One that I’ve written about many, many […]
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[…] So why didn’t Shumlin simply call for a big tax hike? Or look for more handouts from Washington? Or what about those fanciful assumptions that socialist health care would be more efficient? […]
This article is only about 60 years late! The simple fact is that Obamacare simply adds another huge amount to the non-insurance and non-healthcare side of the equations, more and more bureaucrats, and more and more insurance expenses unrelated to healthcare! The real problems started with HMO’s in Massachusetts back in the ’60’s and with the tax break for employers. I quit the corporate market by going to be self-employed back in the late ’80’s. The insurance I had under the corporate rule, was about 300% more for the same coverage as an individual. So, I quadrupled the deductible to keep it close to the same. Just government rules, not reality was the difference! Obamacare will drastically increase insurance costs and provide not one penny for healthcare!!
There is a simple way to get government out of healthcare.
Take some of the money that is currently being spent on: healthcare deductions, Medicare, Medicaid, and ACA discounts; and distribute it to every citizen over 21. It works out to about $3,000/yr per adult that could be deposited into individual Health Savings Accounts.
Note that someone receiving support from Medicare or Medicaid would end up in the same net position. The remaining amounts should also be deposited in HSA’s so they could have improved private coverage.
Low income people would have the money to buy modest healthcare.
Middle to high income people would have an incentive to buy coverage wisely, but for an individual with a 25% tax rate, that cash would be the equivalent of a $12,000 healthcare tax deduction.
While there would be no requirement to buy health insurance, individuals would not be allowed to “free ride” but would be liable for any unpaid hospital bills. A few stories about people being ruined by not having insurance and you would quickly have universal coverage for citizens.
To get third-party payers [government, businesses, and insurance companies] out of the way and open up free market healthcare we should move to “Group Self-Insurance”. Here’s a video link:
Interesting counter statistic: Ontario taxpayers pay 21.5% to 51.7% of their income in income tax every year.
http://www.taxtips.ca/taxrates/on.htm
The fact is that if Vermont wants to go single-payer and Massachusetts want to go state-subsidized mandatory coverage, that’s fine, so long as other states are free to do what they will with health insurance coverage. Then we can see what experiments actually work. If health care in a single-payer system is so much better and less expensive, you’ll see people visiting Vermont for medical tourism. If not, you’ll see them going to another state or staying home in their own state.
Why force 330 million people into the same system on the unproven assumption that it might be cheaper with better care? Experiments require falsification and you can’t do that if you haven’t got any control subjects.
But, of course, this has never been about cheaper health insurance or better health care. It’s about something far more incidious … nothing less than the complete loss of liberty in the pursuit of an ideal that Eastern Europe, the Soviet Union and China have already proven does not work.
It does not take much to sabotage free markets. Enough dirigistic government interventions and you move into that no man’s land where it’s neither free market, nor completely socialized. That is the unstable and transitory state of the crony-capitalism middle ground. The state where things are regulated enough that free markets no longer function, but also not regulated enough to exclude various cronies from taking advantage of the system.
Once in that middle ground, experience shows that voters then automatically embark on the self-destructive transition to full socialization. With roughly half of healthcare activity now being under the centralized control of the collective, that is the era we are living in, the short transitory era to complete socialization. Socialization of medicine is not far off now. Healthcare is first in the pipeline to nationalization. Then education will follow, housing, agriculture etc.
But don’t despair. The point where the US loses its top competitiveness in the world, and hence all hell breaks loose in a vicious cycle of decline, will happen much earlier; much before a more substantial transformation to socialism completes. So there is… hope!… but my guess is that — like most voter-lemmings before them in different times and different nations — Americans will have to fall pretty low before they hit bottom and regenerate. It will be an interesting ride down the wretched path to decline. Make exit plans or build your bunker now; before that happens. Once the s hits the fan all exits and mitigating options will be jammed by the stampede.
My personal advice is: Take part in the crony game and sell the American people the poison they long for to suicide. It is not a pleasant task, but you can become moderately wealthy doing that, though you also have to find a way to hide amongst the masses once the angry pitchforks have consumed all productivity in their attempt to conscript the individual to serve the whole most of his/her day.
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